Answer:
1. Cash balance according to bank statement $370,000
Cash balance according to company’s records $370,000
2. a. April 30
Dr Cash $42,000
Cr Notes Receivable $40,000
Cr Interest Income / Interest Revenue $2,000
b. April 30
Dr Accounts Payable - Targhee Supply Co $6,840
Dr Miscellaneous Expenses [Bank service charge] $145
Cr Cash $6,985
3. $370,000
Explanation:
1. Preparation of a bank reconciliation
AMERICAN MEDICAL COMPANY
Bank Reconciliation
April 30
Cash balance according to bank statement $388,600
Add: Deposit of April 30, Not recorded by bank $42,500
Add: Bank Error in Charging check as $420 instead of $240 [$420 - $240] $180
Deduct: Outstanding Checks $61,280
Adjusted balance $370,000
Cash balance according to company’s records $334,985
Add: Note and Interest Collected by bank $42,000
Deduct: Error in Recording Check [$7,600 - $760] $6,840
Deduct: Bank Service Charges $145
Adjusted balance $370,000
2. Preparation of Journal entries.
Journal entries
a. April 30
Dr Cash $42,000
Cr Notes Receivable $40,000
Cr Interest Income / Interest Revenue $2,000
b. April 30
Dr Accounts Payable - Targhee Supply Co [$7,600 - $760] $6,840
Dr Miscellaneous Expenses [Bank service charge] $145
Cr Cash $6,985
($6,840+$145)
3. Based on the information given If a balance sheet is prepared for American Medical Co. on April 30, the amount that should be reported as cash will be $370,000
